Feudalism Disguised as Egalitarianism: A Critique of Georgism

In 1879, Henry George published his tour de force Progress and Poverty, promising a comprehensive “Inquiry into the cause of industrial depressions and of increase of want with increase of wealth.” Within the pages of his remarkably successful treatise on the allocation of both land and capital (which still remains one of the bestselling books on economics to-date) George proposed a single tax theory: the Land Value Tax (LVT). Proponents of the LVT and the subsequent ideology which evolved out of Progress and Poverty, and which remains present today, became known simply as Georgism, or Geo-libertarian. In America, when land was plentiful the wages of workers was higher. Conversely, as land was fenced off wages fell. As a journalist George also noticed problems such as urban sprawl, poorer working conditions, as well as more hazardous, and a working class cash-strapped by privileged landowners. George viewed all of these as being market failures, albeit remediable ones. Here we will analyze George’s proposed solution (the LVT) critically, while holding his pages over the fires of history and economics.

The foundations of Georgism are relatively simple and drawn out with great clarity. Produced goods, i.e. tables, books, clothing, buildings, etc., etc., belong to the producers of the goods or anyone who has made a mutual agreement with a producer for acquiring a good (relinquishing the producer’s right to claim ownership). Georgists are unwavering in their commitment to protecting private property in the field of production and produced goods, but where they contravene the classical-liberal view of property rights is on the issue of landownership. Supporters of a LVT do not deny private interest, individually or within a firm, economically improves the land. They move idle land to productive space, but at a heavy price to workers and the less affluent. Land essentially becomes less accessible to those who are not financially privileged. The solution to such problems, as Georgists would have it, is to implement a single tax on land rents. There are two reasons for the LVT, the first being a moral justification, and the second being that of an economic justification.

Land –unlike produced goods– cannot be claimed to be owned by any one man. It is natural, god-given if you will; therefore it belongs to society as a whole. This is the moral argument behind a 100 percent levy on land rents (a “tax” on the price of land; not on the buildings, ditches, waterways, or any other productions occurring on the land). The indirect nationalization of land by way of government levy would result, but this doesn’t cause concern for Georgists. Not only do they believe “debates on tax reform…focus on tapping streams of income or output, ignoring the possibility and advantage of using rents unrelated to human effort, thus eliminating disincentives, tax wedges, and excess burdens,”[1] they also believe revenue generated by a 100 percent levy on unimproved land would facilitate the financial expenditures needed for their preferred functions of government(s). Economic ethics of Georgist theory dictates a government can be adequately financed by a LVT with minimal to no economic harm done to individuals or productive output. These arguments are on all accounts fallacious.

On the Moral Justifications

To consider the moral argument of Georgism we must take into account Mark Twain’s words telling us the world owes us nothing because it was here first, and this is correct. The world (thus land) was here long before mankind. Even in biblical terms the land was here before mankind (albeit not much longer than mankind, but longer nonetheless). These simple facts have led Georgists to conclude outright ownership of land is wrong or even utter theft, because land must be assumed to belong to society as a whole. Like most philosophical ideologies, Georgism mistakes society and government for being a single entity. Government is a product of society, it is not itself society. Since government is not society, rather a monopoly on force, how can a Georgist legitimately claim land belongs to society as a whole when their proposed system gives the title of landlord to the Government (a separate entity)? Transferring titles of landownership from individuals to government doesn’t solve the original Georgist complaints against landownership. The land is now owned by extremely speculative, bureaucratic, and reckless human beings who lose nothing by making poor decisions. Georgism essentially supplants private landownership exploitation, as they would call it, with state-landownership where the new landlords (the state) have the means for bombing the neighboring landlords, and maintain a monopoly on force against the ‘tenets’ of its land. Governments warring over landownership are not as peaceful as private individuals trading for landownership, to say the least.

To borrow a phrase termed by Robert LeFevre, Georgists are exceptionists. They believe in free trade and vehemently oppose foreign trade barriers. Like minarchists, Georgist beliefs in the laissez-fare only extend so far. They argue markets are best for the purpose of allocating wealth and scarce goods, and they believe in the price system while remaining opposed to all government intervention within the market except land. They forgo their beliefs in markets when discussing the issue of landownership. LeFevre provides a satirical anecdote to underscore the irony of Georgists relinquishing their “stalwart” opposition to all taxes, but find deliverance from evil with a LVT:

Land value taxation, the Georgists aver, provides the long-sought solution to economic problems. This is the elixir which will bring justice and harmony between the state and the individual; it is the philosopher’s stone which will eliminate speculative greed; it is the talisman which will forever determine which taxes are just and which are unjust; it is the alchemy by means of which governments can be reduced to necessary size, and man can live in harmony and prosperity forever and ever.”

Murray Rothbard offered a more realist view of the matter when he asked Georgists why a newborn baby in Iowa should have a stake in a parcel of land in, say, Pakistan – and vice versa? He also argued that land, in the beginning, did not and still does not belong to society as a whole. Unused, untouched land is not owned by an individual or society, it is simply unused. It will remain so until “the pioneer, the homesteader, the first user and transformer of this land…brings this simple valueless thing into production and social use” (Rothbard, 35).

On the Economic Justifications

The moral arguments aside, Georgism fails to hold its own under economic pressures as well. First we must go back to the beginning once again. Land was here first and then came mankind. Before man value and prices did not exist, therefore the value and prices of land did not exist. According to Georgism it was the efforts of society which led to value being placed upon land. Thus another reason land must go to society as a whole rather than the individual or firm. Of course, as we illustrated above, this does not happen in a Georgist world. Instead the land goes to government which is worse and far more capable of doing worse than any private individual or firm. Notwithstanding, Georgism’s belief in land value being wholly an extension of society is erroneous:

In actual fact, value is an abstract, subjective, terminal supposition, whereas the prices by means of which land privately owned is conveyed are determined by the conflicting forces of supply and demand working between freely bargaining agents. Thus, the value (or the tax) attached to any piece of land is invariably an arbitrary and subjective finding, ,whereas the pricing by means of which conveyances occur results from an objective finding in which competing forces reach, at a given moment, a point of voluntary agreement.

Understanding of this point reveals that value and price are not only not a part of the same process, one being subjective, the other objective, they are not even related. Values are not provided by society, but are attached to any item of property wherever a single person desires what he possesses or wishes to possess. Any tax based upon evaluation is automatically an arbitrary determining by a person endowed with power to take wealth from others in a forceful manner” (Lefevre, 38).

This can also be refuted on a more micro level as well, the neighborhood. George himself wrote that nearly 100% of a parcel of land’s value is not inherent in the piece of land, but is derived from the surrounding community. Clearly he is not arguing value is created absent of mankind, rather the value was created by humans who are not the property owners. The Georgist argument that property owners should have to pay for capitalizing on an externality they did not create (land) is refuted by the fact that the externalities are created every day by surrounding property owners and to punish them as a class is illogical. Like all scarce goods, land is subject to price changes. When outside forces cause the price of a good to rise, Georgists generally contend it is a good thing – except when it comes to land. This is another example of exceptionism on the part of the Georgists. Once again markets and community cooperation are always preferred for the Georgist, except when it comes to land rents.

Perhaps the greatest flaw in the Georgist economic justification is brought forth by, again, Robert LeFevre. Georgist economics is based on the Labor Theory of Value, which states nothing holds value until human hands have acted upon it. George said himself that wealth was not to be levied, only the value of land prior to it being improved, but LeFevre shows a fatal misstep in George’s thought:

The core of the Georgist argument is the supposition, shared by all socialists, that the problem of civilization relates to an improper distribution of wealth. It is for this very reason that George favors the removal of land from private ownership since each piece of land is different and inequalities are bound to arise through private ownership of land.

But here, George is tacitly admitting that land is wealth. If land is the “source of all wealth,” a Georgist contention, then wealth derives from land. If wealth derives from land, it must be that land has some relationship to wealth. George assumes that it is man’s labor applied to land that provides wealth and creates value. If man’s labor occurred (in some fanciful manner) removed from the land, then he might be forgiven for contending that land is not wealth, nor in that case could it be the source of wealth, IF labor created wealth. Wealth does not come out of nothing. It certainly does not emerge from labor removed from land. Wealth emerges from land because wealth must come out of something and not out of nothing. Land is wealth and wealth is land. The private ownership of wealth is implicit in a free economy. And with George, it could be said rightfully that no wealth should be subject to taxation (LeFevre, 56).

The Economic Data

What originally led Henry George to provide us with the idea of a Land Value Tax was his concern that as land became less plentiful wages fell. This, faced with the historical data, falls harder than the moral and economic justifications for Georgism. His book was published in 1879, the decades beforehand (8 to be exact) offer absolutely no correlation between land and wages. In fact, it shows the opposite of what George claimed was occurring.

First, we must look at the population data and align it with the total square miles of land in the same year. After doing so, we see a steady increase in persons per square mile overtime.

Now we must take into account wage rates through 1800-1880. After doing so, we see wage rates gradually increase through the same time period as charted in the population density chart.

(Index, 1850 = 100)

Year

Farm Labor*

Non-farm Labor

Carpenter

1800

93

111

1812-15

93

111

100

1818

86

83

100

1830-32

79

83

96

1840

96

94

93

1850

100

100

100

1860

127

117

113

1870

129

178

200

1880

108

152

149

1889

135

157

153

*Monthly, including board.

The numbers show that despite the total population density per square mile rising by over 130 percent wage rates did not fall. In fact, wage rates rose considerably. The points in which wages did see a definitive lull, and drop were between 1815 and the 1830’s, but this was not due to land and property issues as Georgists may contend. The country was plagued with six economic recessions during this time period, resulting from credit and monetary expansion, and poor trade policies during and following the war of 1812; much like the staggering U.S. economy following the Civil War. Nonetheless, wage rates recovered to pre-recession levels and continued to rise upwards despite population density growing alongside. According to George, who based his entire theory on land ownership and poverty being directly connected, this should not have happened. Wages should have fallen. Where are these falling wage rates George was talking about? In fact, by the close of the 19th century wage rates were roughly 46% higher for Farm Labor, 41% higher for Non-farm Labor, and 53% higher for carpenters.[3] As a side note, GDP per capita nearly doubled from 1820-1870, which is believed to be a rate “many times higher than experienced during the colonial period,” and life expectancy rose from 38.3 to 47.8.[4] One really has to question the validity of George when we see all of these economic and health improvements in a period when wages were supposedly falling.

Final Thoughts

The Land Value Tax might be the Least Bad Tax, but that in no way implies that LVT is a good thing. Georgists disagree. One of the problems with the LVT is that it presumes that One Sacred Landlord, (the government) will never loose its grip upon your land; you will forever owe rent to that government. To be fair, there are several anarcho-Georgists who are very sincere: The rent would be collected via class action lawsuit in a non-monopoly court system and distributed to everyone on earth equally. It still doesn’t get around the problem that incentives don’t line up: If people had the incentive to devalue their land and there was no central planning, then pollution would be rampant.

Furthermore, LVT advocates proclaim that, if you do not pay such land rent, you are engaged in a morally impermissible act.

The LVT advocates claim is to the “site value” or “unimproved value” – and here, I think they too quickly conflate the two. Their theory rests upon the premise that God created the land (or it is just natural), man did not. If this is their basis, then God (nature) is entitled to the rent which would be attributed to genuinely unimproved land – that is – just as He ( or nature) created it, without roads, buildings, or other man-made improvements. This is not the same as the “site value”, the value after roads have been built, soil has been tilled, forests have been cleared, and so forth and so on.(George himself, and I’m not saying all LVT advocates subscribe to this, held that nearly 100% of a piece of land’s value is not inherent in the piece of land, but was derived from the surrounding community, so it’s not necessarily that all value wasn’t created by humans, it’s just that the value was created by humans who are not the property owner. (Note that, to argue in Georgist terms, you have to abandon the Austrian notion of value as subjective. Whenever I use “value” here, I really mean utility.) Bryan Caplan goes into detail in his critique on Georgism on why this is an absurdity: The Georgist argument that property owners should have to pay for captalizing on an externality they didn’t create is refuted by the fact that the externality was also created by surrounding property owners, and to punish them as a class is illogical.) Nor is there any obvious reason why governments should magically acquire title to the land, and the rents therefrom, which God (nature) created. Georgists counter that the landlords are entitled to rent for any improvements which they have made. This seems like a generous concession, but when A buys land from B, A buys not only the underlying unimproved land, but the improvements made by B and an entire chain of previous owners. Is not A buying not only the improvements, but the right to collect rent for those improvements? It is meaningless to own one aspect of property, but not the other aspect, the right to collect revenues from willing tenants.

I also want to know what they mean by “idle.” Awhile can mean different things to different people. For example, I could inherit a piece of land from my parents and not do anything for 10 years because I want to save capital before developing it into a farm, build more houses, etc.

Unused land always holds value to someone. For example, an investor wanting to build a farm could come along tomorrow and offer you a certain sum of money for your unused land. If you feel that this sum is more valuable that the potential use of the land, you may sell it to the investor. This is critical because advocates of LVT want to punish you for having unused land. However, it is the market that should determine the use of the land. In a sense they are only thinking about the short run but not the long run benefits.

They conflate access to the earth with ownership thereof. There is no right to ownership of anything material. There is no right to access land, particularly when it is the property of others. Asserting that right would be trespassing. Depriving the owner of the usage of his own land is theft. The question of improvement is irrelevant. The very philosophical basis for this system relies upon theft, which is why it should be rejected by libertarians.

It is fallacious to just assert that since land title was created by the state, it is not legitimate. Ownership must be recognized in a clearly defined manner. The quickest way to create disputes over ownership is by eliminating the means to clearly and concisely identify that ownership. This means less production, less land improvement, and ultimately, greater poverty. Land title is vital to a society aiming for a properly functioning free market. Another issue that needs to be addressed, is the assertion that land owners have a philosophical duty to pay a third party in order to improve land that may or may not be their own. Not only is it asserted as a duty, but it is asserted as such a high duty that the threat of government force is brought to bear against those who dissent.

If it was self-evident, then land owners would not need any form of compulsion whatsoever in order to pool their resources for such use. I deny there is a moral duty to provide for others for any material purpose whatsoever. This is why [typically] Austrians reject the premise that the act of paying taxes is a moral duty, and substitute the assertion that demanding taxes is theft- along with resources being misallocated.

Land title can exist with or without a state, given properly functioning legal order. Legal order can exist with or without a state, but it requires a method by which ownership is determined. With homesteading, this is solved. Homesteading is the emergent creation of land title without a state being necessary.

Some other flaws is that LVT advocates don’t believe in land as property; all land is owned equally. There are a few problems with that.

-It will amplify the tragedy of the commons. We’ve already seen this with things like fishing and water rights. There is no incentive to take care of the land and its resources. Now, a Georgist could argue that a land tax regime wouldn’t in anyway cause a tragedy of the commons situation. Tragedy of the commons takes place in situation of collective ownership, where there is no excludability to define individual property domain. A land tax system keeps titles owned and excludable by individual owners – the payment of a land tax as recompense for that excludability has no effect on the individual ownership and incentive for preservation of individual property. However, by virtue of it being a perpetual rent and not ownership, it would have an effect very *similar* to that of the tragedy of the commons, but it wouldn’t technically be that.

-They also assume the land value tax is the answer by taxing socially created wealth but not taxing the products created on that land. This means that they want to prevent land from being idle. However, their whole argument ignores the time factor in production. Capital is the product of human energy, land, and time. Time is the reason people work and save rather than consume. So idle land is should not be looked at as a problem.

-It assumes that all land will be nationalized (although they use a semantic definition that government is a realtor and puts it up for bid). How else will you get the property that is “idle” from those who currently own it? They’re not going to give it up willingly.

-If an individual cannot own original land, neither can he in the same sense own the fruits of his labor. The Georgists would claim that you can, but how? The fruits of labor come from nature. They cannot permit a man to own the fruits of his labor while denying him ownership of the original materials which he uses and transforms.

-What about animals? They clearly come from nature and belong to the land. How much claim do I have to a cow if the rest of the world also has a claim to it? Can I not eat the cow or should it be rationed out by the state?

You need food to live. Do you have a right to food? If you grow it and buy it, yes. So for a similar reason you can’t use someone else’s land without permission. Essentially you created a positive right by purchasing food through exchange. However, food is not a negative right. We need food to live just like we need a space to live. Both are scarce resources, and you don’t have a right to either even though you need them to live or exist.

Looking at the moral justifications for a Land Value Tax we see they are fatally flawed. Shifting the title of landowner away from private individuals, who have their own money and livelihood on the line, over to governments, who are not part of society or suffer any economic consequences if they fail, can hardly be seen as justifiable. The economic justifications are the equivalent of attempting to justify serfdom in a new feudal kingdom. A group of elite essentially own the title for all properties, of which they can exploit, sell, or destroy as they see fit. George even digs his own grave, along with the grave of Labor Theory of Wealth, by admitting land is wealth regardless of making himself very clear about not levying taxes on wealth. After further review it became even clearer that Georgists are exceptionists, an ideology plagued with blatant exceptions and contradictions.

And to add insult to injury, the economic data which Henry George based his entire magnum opus Progress and Poverty on (increased scarcity of land leads to lower wage rates) turns out to be completely unfounded. In fact, it was proved just the opposite. Wages, life expectancy, and GDP per capita rose despite a growing population density.

Georgism can be reduced down to one simple phrase: Feudalism Disguised as Egalitarianism. The hopes for equality through economic intervention lead to state-landownership, thus feudalism.

I am a student of Economics at Harvard University, as well as a private investor, and the Co-Owner and Editor at WetheIndividuals.org. Mostly, though, I enjoy spending my time reading early 20th century fiction from the 'lost generation' and canoeing, fishing, and closing out my evenings at the local gin joints. That said, I am an Individualist-Anarchist. My ideology is an amalgamation of ideas stemming from Voltairine de Cleyre, Lysander Spooner, Henry David Thoreau, Benjamin Tucker, F.A. Hayek, Emma Goldman, Rose Wilder Lane, Michel Foucault, Ludwig von Mises, Murray Rothbard's early works, Gary Chartier, and Sheldon Richmond.

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